<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
CHANNELL COMMERCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
CHANNELL COMMERCIAL CORPORATION
_________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 8, 2000
__________________
The 2000 Annual Meeting (the "Meeting") of the Stockholders of Channell
Commercial Corporation, a Delaware corporation (the "Company"), will be held at
9:00 a.m., local time, on May 8, 2000, at the Embassy Suites Hotel, 29345 Rancho
California Road, Temecula, California 92592, to consider and vote on the
following matters:
1. The election of two directors to serve on the Company's Board of
Directors;
2. To ratify the selection of Grant Thornton LLP as the Company's independent
public accountants;
3. To transact such other business as may properly come before said annual
Meeting or any postponement or adjournment thereof.
Only stockholders of record at the close of business on March 27, 2000 of the
Company's Common Stock will be entitled to notice of, and to vote at, the
Meeting and any adjournment or postponement thereof.
By order of the Board of Directors,
/s/ Jacqueline M. Channell
Jacqueline M. Channell
Secretary
Temecula, California
April 10, 2000
<PAGE>
Channell Commercial Corporation
26040 Ynez Road
Temecula, California 92591-9022
ANNUAL MEETING OF STOCKHOLDERS
May 8, 2000
________________
PROXY STATEMENT
________________________
SOLICITATION OF PROXIES
This proxy statement is solicited on behalf of the Board of Directors of
Channell Commercial Corporation, a Delaware corporation (the "Company"), for use
at the 2000 Annual Meeting of Stockholders to be held at the Embassy Suites
Hotel, 29345 Rancho California Road, Temecula, California 92592 on May 8, 2000
at 9:00 a.m. local time, and at any and all adjournments or postponements
thereof (the "Meeting").
All shares represented by each properly executed, unrevoked proxy received in
time for the Meeting will be voted in the manner specified therein. If the
manner of voting is not specified in an executed proxy received by the Company,
the proxy will be voted FOR (i) the election of the nominees listed in the proxy
for election to the Board of Directors, and (ii) the ratification of the
selection of Grant Thornton LLP as the Company's independent public accountants.
Any stockholder has the power to revoke his or her proxy at any time before
it is voted. A proxy may be revoked by delivering a written notice of
revocation to the Secretary of the Company at the address set forth above, by
presenting at the Meeting a later-dated proxy executed by the person who
executed the prior proxy, or by attendance at the Meeting and voting in person
by the person who executed the proxy.
This proxy statement is being mailed to the Company's stockholders on or
about April 10, 2000. The Company has retained a firm to assist in the
distribution of proxies by mail for an estimated fee of $5,000 plus
reimbursement for certain expenses, which will be borne by the Company.
Expenses include reimbursement paid to brokerage firms and others for their
expenses incurred in forwarding material regarding the Meeting to beneficial
owners of the Company's Common Stock.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 9,081,392 shares of common stock of the Company
("Common Stock") outstanding at the close of business on the record date, March
27, 2000, will be entitled to notice of, and to vote at, the Meeting. On each
matter to be considered at the Meeting, each stockholder will be entitled to
cast one vote for each share of Common Stock held of record by such stockholder
on March 27, 2000.
In order to constitute a quorum for the conduct of business at the Meeting, a
majority of the outstanding shares of the Common Stock entitled to vote at the
Meeting must be represented at the Meeting. Shares represented by proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Directors will be elected by a favorable
vote of a plurality of the shares of voting stock present and entitled to vote,
in person or by proxy, at the Meeting. Accordingly, abstentions or broker non-
votes as to the election of directors will not affect the election of the
candidates receiving the plurality of votes. All other proposals to come before
the Meeting require the approval of a majority of the shares of stock having
voting power present. Abstentions as to a particular proposal will have the
same effect as votes against such proposal. Broker non-votes, however, will be
treated as unvoted for purposes of determining approval of such proposal and
will not be counted as votes for or against such proposal.
1
<PAGE>
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 1, 2000 certain information as to
the beneficial ownership of Common Stock by: (i) each of the Company's
directors, (ii) the Company's chief executive officer and each of the four other
most highly compensated executive officers as indicated in the Summary
Compensation Table under Executive Compensation below, (iii) all directors and
executive officers as a group, and (iv) each person believed by the Company to
beneficially own more than five percent (5%) of the outstanding Common Stock.
In each instance, information as to the number of shares owned and the nature of
ownership has been provided by the individuals identified or described and is
not within the direct knowledge of the Company.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
--------------------------------------------
Name and Address Number of Shares Exercisable Percent
of Beneficial Owner(1) Owned Options(2) Total of Class
----------------------------- --------------------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C>
William H. Channell Sr. and 3,380,830 - 3,380,830 37.2%
Jacqueline M. Channell, as
co-trustees of the Channell
Family Trust (3)
26040 Ynez Road
Temecula, CA 92591-9022
William H. Channell, Jr. 1,389,250 141,668 1,530,918 16.4%
26040 Ynez Road
Temecula, CA 92591-9022
Jacqueline M. Channell - 2,000 2,000 *
26040 Ynez Road
Temecula, CA 92591-9022
Eugene R. Schutt, Jr. 2,000 2,000 4,000 *
24 Old Ranch Road
Laguna Niguel, CA 92677
Richard A. Cude 427 2,000 2,427 *
2455 Terrace Avenue
Central Lake, MI 49622
Gary W. Baker 700 22,667 23,367 0.3%
26040 Ynez Road
Temecula, CA 92591-9022
Edward J. Burke - 22,667 22,667 0.3%
26040 Ynez Road
Temecula, CA 92591-9022
Andrew M. Zogby 700 23,668 24,368 0.3%
26040 Ynez Road
Temecula, CA 92591-9022
</TABLE>
(continued on next page)
2
<PAGE>
(continued from previous page)
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
--------------------------------------------
Name and Address Number of Shares Exercisable Percent
of Beneficial Owner(1) Owned Options(2) Total of Class
----------------------------- --------------------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C>
Wellington Management
Company, LLP (4) 706,800 - 706,800 7.8%
75 State Street
Boston, MA 02109
David L. Babson & Company, Inc. (4) 670,850 - 670,850 7.4%
One Memorial Drive
Cambridge, MA 02142
Carrie S. Rouveyrol (5) 490,960 - 490,960 5.4%
P.O. Box 1080
Stinson Beach, CA 94970
The Taylor Family Trust (5) 490,960 - 490,960 5.4%
1450 Ravenswood Lane
Riverside, CA 92506
All present directors and executive officers
as a group (8 in number) 4,773,907 216,670 4,990,547 53.7%
- -------------------------
</TABLE>
* Represents ownership of less than 0.1%
(1) The persons in this table have sole voting, investment and dispositive power
with respect to all shares of the Common Stock shown as owned by them,
subject to community property laws where applicable.
(2) This information represents outstanding options exercisable currently or
within 60 days of this Proxy Statement.
(3) William H. Channell, Sr. and his wife, Jacqueline M. Channell, are the co-
trustees of the Channell Family Trust which is the shareholder of record of
the shares shown on the table as beneficially owned by the Channell Family
Trust. Together, they have sole voting and dispositive power over the
shares of Common Stock owned by such trust.
(4) This information reported on Schedule 13G filed by Wellington Management
Company, LLP and David L. Babson & Company, Inc. as of December 31, 1999.
(5) Carrie Rouveyrol and Michelle Taylor, who is a co-trustee of the Taylor
Family Trust, are daughters of William H. Channell, Sr. and Jacqueline M.
Channell and sisters of William H. Channell, Jr. Ms. Taylor and her
husband, Roy Taylor, are the sole trustees of the Taylor Family Trust and
together have sole voting and dispositive power over the shares of Common
Stock held by such trust.
3
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to the Company's current
executive officers and directors and their ages as of December 31, 1999.
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
William H. Channell, Sr... 71 Chairman of the Board and Chief Executive Officer
William H. Channell, Jr... 42 President, Chief Operating Officer and Director
Gary W. Baker............. 56 Vice President, Finance and Chief Financial Officer
Andrew M. Zogby........... 39 Vice President, Corporate Marketing
Edward J. Burke........... 44 Vice President, Corporate Engineering
Jacqueline M. Channell.... 68 Secretary and Director
Eugene R. Schutt, Jr...... 46 Director
Richard A. Cude........... 66 Director
</TABLE>
The Company's Board of Directors was comprised of five members at December 31,
1999. In March 2000, a sixth member was appointed to the Board. The directors of
the Company are staggered into three classes, with the directors in a single
class elected at each annual meeting of stockholders to serve for a term of
three years or until their successors have been elected and qualified. Two of
the Company's directors are to be elected at the Meeting to a three-year term
expiring in 2003. The authorized number of members of the Board of Directors is
currently seven. The executive officers of the Company serve at the pleasure of
the Board of Directors.
CONTINUING DIRECTORS OTHER THAN NOMINEES
William H. Channell, Sr., the son of the Company's founder, James W. Channell,
has been the Chairman of the Board and Chief Executive Officer since the Initial
Public Offering. Prior to this time, he had held the position of President and
Chief Executive Officer since 1966. Mr. Channell, Sr. is a co-trustee of the
Channell Family Trust, which is a principal stockholder of the Company, and is
the husband of Jacqueline M. Channell and the father of William H. Channell, Jr.
His term as a Director expires in 2002.
Jacqueline M. Channell has been the Company's Secretary and a Director since
1966. She is a co-trustee of the Channell Family Trust, which is a principal
stockholder of the Company, and is the wife of William H. Channell, Sr., and the
mother of William H. Channell, Jr. Mrs. Channell's term as a Director expires
in 2001.
Eugene R. Schutt has been a Director of the Company since July 1996. Mr.
Schutt is the CEO of CD1 Financial.com, an automotive lending and leasing
company owned by CarsDirect.com. Prior to joining CarsDirect.com, Mr. Schutt
had 25 years of experience in finance and acquisitions covering a variety of
industries. He most recently served as President of Avco International, a
division of Avco Financial Services, Inc. From 1984 to 1992 he served as
President of Pratt Industries. Mr. Schutt has served on the board of directors
of numerous companies. Mr. Schutt's term as a Director expires in 2002.
Peter J. Hicks became a Director of the Company in March 2000. Mr. Hicks is a
managing director of Linx Partners, an investment firm specializing in private
industrial equity investments. From 1987 to 1999, Mr. Hicks was a managing
director of Schroder and Company. Mr. Hicks has more than 23 years of
investment banking and corporate finance experience and has served on the board
of directors of numerous companies. Mr. Hicks' term as a Director expires in
2001.
EXECUTIVE OFFICERS
Gary W. Baker has been the Company's Vice President, Finance since May 1996,
and the Chief Financial Officer since 1990. Mr. Baker was the Company's
Corporate Controller from 1985 to 1990. From 1983 to 1985, Mr. Baker was the
Corporate Controller of Symbolics, Inc., a publicly traded manufacturer of
computer products, and has over 30 years of public and private accounting
experience.
4
<PAGE>
Andrew M. Zogby has been the Company's Vice President, Corporate Marketing
since March 1996. Prior to joining the Company, Mr. Zogby was Director of
Strategic Marketing, Broadband Connectivity Group for ADC Telecommunications, a
publicly traded, telecommunications equipment supplier to both telephone and
CATV network providers worldwide. He had been with ADC Telecommunications since
1990. Mr. Zogby has held various technical marketing positions in the
telecommunications equipment industry since 1984.
Edward J. Burke has been the Company's Vice President, Corporate Engineering
since May 1996 and has served in various similar capacities with the Company
since 1984. Mr. Burke has held various technical positions in the thermoplastic
product engineering and tooling design field since 1978.
COMPENSATION OF DIRECTORS
Directors who are also officers of the Company (except as indicated below)
receive no additional compensation for their services as directors. The
Company's non-management directors receive compensation consisting of an annual
retainer fee of $15,000 plus $1,000 for attendance at any meeting of the Board
of Directors or any committee thereof, plus direct out-of-pocket costs related
to such attendance. Mrs. Channell also receives non-management director retainer
and attendance fees. Mrs. Channell does not receive separate compensation for
serving as the Company's Secretary. In addition, pursuant to the Company's 1996
Incentive Stock Plan (as described below), each non-management director
(including Mrs. Channell) received options to acquire 1,000 shares of the
Company's Common Stock with an exercise price equal to the Initial Public
Offering price, and on the date of each of the Company's annual stockholder
meetings after the Initial Public Offering, each non-management director
(including non-executive officers who serve as directors) serving on the Board
of Directors immediately following such meeting are to receive options to
acquire an additional 1,000 shares of the Company's Common Stock with an
exercise price equal to the market value of the Common Stock on the date such
options are granted. These options will become exercisable at a rate of 33 1/3%
per year commencing on the first anniversary of the date of issuance and will
have a term of 10 years.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the annual and
long-term accrual basis compensation of the Company's Chief Executive Officer
and the four additional most highly compensated executive officers for the years
ended December 31, 1999, 1998 and 1997 (collectively, the "Named Officers").
<TABLE>
<CAPTION>
Other Annual
Name and Positions Held Annual Compensation Compensation
with the Company Years Salary ($) Bonus ($) ($)(1)
- --------------------------------- ----- ---------- ------------- -------------
<S> <C> <C> <C> <C>
William H. Channell, Sr. 1999 $420,000 $ - $-
Chairman of the Board and 1998 520,000 - -
Chief Executive Officer 1997 520,000 - -
William H. Channell, Jr. (4) 1999 $520,000 $ - $-
President and Chief 1998 520,000 360,000 -
Operating Officer 1997 520,000 130,000 -
Gary W. Baker (3) 1999 $161,274 $ 96,832 $-
Vice President, Finance 1998 160,650 81,666 -
and Chief Financial Officer 1997 142,800 83,666 -
Edward J. Burke (3) 1999 $141,505 $ 87,141 $-
Vice President, 1998 136,063 81,666 -
Corporate Engineering 1997 131,250 83,666 -
Andrew M. Zogby 1999 $167,205 $ 24,335 $-
Vice President,
Corporate Marketing
Dale C. Wooding (3) 1998 $119,735 $ 81,666 $-
Vice President, 1997 115,500 83,666 -
Manufacturing
Long-Term Compensation
------------------------------------------------
Awards Payouts
------ -------
Securities
Restricted Underlying LTIP All Other
Name and Positions Held Stock Options/ Payouts Compensation
with the Company Award(s) SARs(#) ($) ($)(2)
- --------------------------------- ----------- ---------- ------- -------------
<S> <C> <C> <C> <C>
William H. Channell, Sr. $- - $- $ -
Chairman of the Board and - - - -
Chief Executive Officer - - - -
William H. Channell, Jr. (4) $- 50,000 $- $3,120
President and Chief - 25,000 - 4,257
Operating Officer - 50,000 - 400
Gary W. Baker (3) $- 5,500 $- $4,525
Vice President, Finance - 2,000 - 4,409
and Chief Financial Officer - 6,000 - 478
Edward J. Burke (3) $- 5,500 $- $4,245
Vice President, - 2,000 - 4,082
Corporate Engineering - 6,000 - 984
Andrew M. Zogby $- 6,000 $- $5,000
Vice President,
Corporate Marketing
Dale C. Wooding (3) -$ 2,000 -$ $3,592
Vice President, - 6,000 - 906
Manufacturing
</TABLE>
5
<PAGE>
(1) For each individual named, compensation excludes perquisites and other
personal benefits that did not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus reported for such individual.
(2) Payments to the Company's 401K Plan.
(3) As an incentive for continued services, the Company, in 1996, granted a
cash bonus of $200,000 to Mr. Baker, Mr. Burke and Mr. Wooding, which was
earned and payable in three equal installments on each of December 31, 1997,
1998, and 1999, provided each remained employed by the Company and subject
to continued payment in the event of death.
(4) See "Compensation Committee Report".
DESCRIPTION OF CERTAIN PLANS
1996 Incentive Stock Plan
The Company's 1996 Incentive Stock Plan (the "Stock Plan") currently permits
the granting to the Company's key employees, directors and other service
providers of (i) options to purchase shares of the Company's Common Stock and
(ii) shares of the Company's Common Stock that are subject to certain vesting
and other restrictions ("Restricted Stock"). Initially, a maximum of 750,000
shares of Common Stock were reserved for issuance under the Stock Plan. In
1999, the Stock Plan was amended to allow a maximum of 1,500,000 shares to be
issued under the Plan.
During 1999, the Company granted 97,250 "non-qualified" options to 16
employees and directors, including 50,000 stock options issued to William H.
Channell, Jr., the Company's President. In addition, 77,500 options originally
issued in 1997 at an option price of $13.25 were canceled and reissued at an
option price of $11.00. None of the repriced options were issued to William H.
Channell, Jr. or to any director. After cancellation of options previously
issued to terminated employees, there were options to acquire 768,350 shares of
Common Stock outstanding at December 31, 1999. These options vest at a rate of
33 1/3% per year beginning on the first anniversary of the date of issuance and
have a term of 10 years.
The Stock Plan is administered by the Compensation Committee of the Board of
Directors. The aggregate number of stock options or shares of Restricted Stock
that may be granted to any single participant under the Stock Plan during any
fiscal year of the Company is 100,000. The purpose of the Stock Plan is to
secure for the Company and its stockholders the benefits arising from stock
ownership by key employees, directors and other service providers selected by
the Compensation Committee.
All options granted under the Stock Plan are non-transferable and exercisable
in installments determined by the Compensation Committee, except that each
option is to be exercisable in minimum annual installments of 20% commencing
with the first anniversary of the option's grant date. Each option granted has a
term specified in the option agreement, but all options expire no later than ten
years from the date of grant. Options under the Stock Plan may be designated as
"incentive stock options" for federal income tax purposes or as options which
are not qualified for such treatment, or "non-qualified stock options". In the
case of incentive stock options, the exercise price must be at least equal to
the fair market value of the stock on the date the option is granted. The
exercise price of a non-qualified option need not be equal to the fair market
value of the stock at the date of grant, but may be granted with any exercise
price which is not less than 85% of the fair market value at the time the option
is granted, as the Compensation Committee may determine. The aggregate fair
market value (determined at the time the options are granted) of the shares
covered by incentive stock options granted to any employee under the Stock Plan
(or any other plan of the Company) which may become exercisable for the first
time in any one calendar year may not exceed $100,000.
Upon exercise of any option, the purchase price must generally be paid in full
either in cash or by certified or cashier's check. However, in the discretion of
the Compensation Committee, the terms of a stock option grant may permit payment
of the purchase price by means of (i) cancellation of indebtedness owed by the
Company, (ii) delivery of shares of Common Stock already owned by the optionee
(valued at fair market value as of the date of exercise), (iii) delivery of a
promissory note secured by the shares issued, (iv) delivery of a portion of the
shares issuable upon exercise (i.e., exercise for the "spread" on the option
payable in shares), or (v) any combination of the foregoing or any other means
permitted by the Compensation Committee.
6
<PAGE>
Any grants of restricted stock will be made pursuant to Restricted Stock
Agreements, which will provide for vesting of shares at a rate to be determined
by the Compensation Committee with respect to each grant of restricted stock.
Until vested, shares of restricted stock are generally non-transferable and are
forfeited upon termination of employment. The Company has not made any grants
of restricted stock.
Options/SAR Grants in Last Fiscal Year
The following table sets forth the stock options granted to the Named Officers
for the year ended December 31, 1999.
<TABLE>
<CAPTION>
Potential
% of Total Realized
Number of Options/ Value at
Securities SARs Assumed Annual
Underlying Granted to Exercise Rates of Stock Price
Options/ Employees or Base Appreciation of
SARS in Fiscal Price Expiration Option Term
Name Granted Year 1999 ($/Sh) Date 5% 10%
- ------------------------------- -------------- ------------- ---------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William H. Channell, Sr. - - $ - - $ - $ -
William H. Channell, Jr. 50,000 51.4% $10.750 Aug 2009 337,500 855,500
Gary W. Baker 5,500 5.7% $10.063 Oct 2009 34,689 88,204
Edward J. Burke 5,500 5.7% $10.063 Oct 2009 34,689 88,204
Andrew M. Zogby 6,000 6.2% $10.063 Oct 2009 37,842 96,222
</TABLE>
The options vest at a rate of 33 1/3% per year.
Aggregated Option/SAR Exercises in Last Fiscal Year and December 31, 1999
Option/SAR Values
The following table sets forth the number and value of outstanding stock
options at December 31, 1999. No options have been exercised in 1999.
<TABLE>
<CAPTION>
Number of Shares
Shares Underlying Unexecised Value of Unexercised In-
Acquired Options/SARs the-Money Options/SARs
on Value at December 31, 1999 at December 31, 1999
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------ -------- --------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
William H. Channell, Sr. - $- - $ - /$ -
William H. Channell, Jr. - - 141,667/83,333 65,667/78,148
Gary W. Baker - - 22,667/8,833 9,636/8,439
Edward J. Burke - - 22,667/8,833 9,636/8,439
Andrew M. Zogby - - 23,668/11,332 11,868/13,583
</TABLE>
Option/SAR Repricings
During 1999, the Compensation Committee reviewed the effectiveness of the
outstanding stock options in light of the current stock trading prices. Based
on a comparison of the option exercise prices and the trading price of the
stock, the Committee determined that certain of the outstanding options failed
to provide the incentives that they were initially intended to provide. On
April 20, 1999 the Committee recommended and the Board of Directors approved the
repricing of substantially all the options granted in the year 1997.
7
<PAGE>
The 1997 options were initially priced at $13.25 per share and they were
repriced at $11.00 per share. The trading price of the Company's stock at the
time of the repricing on April 20, 1999 was $8.50. The following table sets
forth information with respect to options held by any current officer or
director and all other options as a group.
<TABLE>
<CAPTION>
Number of
Securities Market Price
Underlying of Shares Exercise Price New Length of Option
Options/SARs at Time of at Time of Exercise Term Remaining at
Name Repriced Repricing Repricing Price Time of Repricing
- ------------------ ---------- -------------- --------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Gary W. Baker 6,000 $8.50 $13.25 $11.00 8 years; 2 months
Edward J. Burke 6,000 $8.50 $13.25 $11.00 8 years; 2 months
Andrew M. Zogby 6,000 $8.50 $13.25 $11.00 8 years; 2 months
All Others 59,500 $8.50 $13.25 $11.00 8 years; 2 months
</TABLE>
Options issued in 1997 held by Mr. William H. Channell, Jr., the President of
the Company, and by members of the Board of Directors were not repriced.
Profit Sharing and Savings Plans
The Company maintains a plan, established in 1993, in accordance with Section
401(K) of the Internal Revenue Code. Under the terms of this plan, eligible
employees may make voluntary contributions to the extent allowable by law.
Employees of the Company are eligible to participate in the plan after 90 days
of employment. Matching contributions by the Company to this plan are
discretionary and will not exceed that allowable for Federal income tax
purposes. The Company's contributions are vested over five years in annual
increments.
Employment Contracts
The Company has entered into employment agreements with each of William H.
Channell, Sr. and William H. Channell, Jr., engaging them as the Chairman of the
Board and Chief Executive Officer, and President and Chief Operating Officer of
the Company, respectively. For their service, each of Messrs. Channell, Sr. and
Channell, Jr., is entitled to receive an annual salary of $520,000. Mr.
Channell, Sr.'s salary is subject to annual cost of living increases. Mr.
Channell, Sr., during 1999, reduced his hours to the Company and his
compensation was reduced proportionately by $100,000 to $420,000. In addition,
each executive is entitled to participate in the Incentive Stock Plan, the
401(K) Plan and the Incentive Compensation Plan. The employment agreements
provide that each executive is entitled to certain other benefits paid for by
the Company, including an automobile allowance, health insurance and sick leave,
in accordance with the Company's customary practices for senior executive
officers.
In the case of Mr. Channell, Sr., such benefits also include (i) during the
term of the agreement, the payment of premiums for a term disability policy
providing for $250,000 in annual benefits in the case of his temporary or
permanent disability, (ii) during the lifetime of Mr. Channell, Sr. and his
wife, Jacqueline M. Channell, medical insurance for each of Mr. and Mrs.
Channell comparable to that provided to the Company's senior executive officers,
subject to a premium reimbursement obligation in the case of the medical
insurance provided to Mrs. Channell, and (iii) during Mr. Channell, Sr.'s
lifetime, a portion of the premiums on a life insurance policy owned by Mr.
Channell, Sr., under which Mrs. Channell is the beneficiary.
Each of the employment agreements has a term of five years. In the event
either executive is terminated without cause (as defined in the employment
agreements), he is entitled to receive, as a severance benefit, an amount equal
to three times his annual base salary, and any options or Restricted Stock
previously granted to such executive will become immediately vested.
At the time of the Initial Public Offering, as an incentive for continued
services, the Company entered into a bonus agreement with Mr. Baker, Mr. Burke
and Mr. Dale C. Wooding, Vice President, Manufacturing. This agreement granted
to each of the three a bonus in the amount of $200,000, which was earned and
payable in three equal installments on December 31, 1997, 1998 and 1999,
provided each remained employed by the Company. The final installment of this
bonus was paid to each prior to December 31, 1999.
8
<PAGE>
Incentive Compensation Plan
Effective beginning in the Company's 1996 fiscal year, the Board of Directors
adopted the Company's 1996 Performance-Based Annual Incentive Compensation Plan
(the "Incentive Plan"). Eligible participants consist of key employees of the
Company. The Incentive Plan is administered by the Compensation Committee of the
Board of Directors. The amount of awards granted under the Incentive Plan are
determined based on an objective computation of the actual performance of the
Company relative to pre-established performance goals. Measures of performance
may include level of sales, EBITDA, net income, income from operations, earnings
per share, return on sales, expense reductions, return on capital, stock
appreciation, return on equity, invention, design or development of proprietary
products or improvements thereto (patented or otherwise), or sales of such
proprietary products or improvements or profitability achieved from sales of
proprietary products or improvements. Awards under the Incentive Plan are
payable in cash or, at the election of the Compensation Committee, Common Stock
of the Company. Mr. William H. Channell, Jr., the Company's President, receives
a bonus calculated using the factors above, but such bonus is earned and payable
based on continued service in subsequent years. The Compensation Committee may
establish a bonus pool from which all awards under the Incentive Plan may be
granted as well as individual, non-bonus pool awards. No participant in the
Incentive Plan may receive awards under such plan during any fiscal year of the
Company in excess of $1,000,000 or 100,000 shares of Common Stock. For 1999, no
bonuses were paid or accrued under this plan.
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. During 1999, this Committee
was composed of Mr. William H. Channell, Sr., an executive officer and employee
of the Company, Mr. Eugene R. Schutt, Jr. and Mr. Richard A. Cude. It is the
responsibility of the Committee to review and approve the Company's executive
compensation plans and policies and to monitor these compensation programs in
relation to the performance of the particular executive and the overall
performance of the Company.
The following is a line graph presentation comparing the Company's cumulative
total return since the Initial Public Offering in July 1996 to December 31, 1999
with the performance of the NASDAQ market, the S & P
COMPARISON OF 42 MONTH CUMULATIVE TOTAL RETURN
AMONG CHANNELL COMMERCIAL CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX, S & P INDUSTRIALS INDEX
AND THE S & P COMMUNICATIONS EQUIPMENT INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CHANNELL NASDAQ S & P
Measurement Period COMMERCIAL STOCK S & P COMMUNICATIONS
(Fiscal Year Covered) CORPORATION MARKET (U.S.) INDUSTRIALS EQUIPMENT
- --------------------- ------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Measurement Pt-07/02/1996 $100.00 $100.00 $100.00 $100.00
FYE 12/1996 $112.50 $108.68 $110.36 $ 97.25
FYE 12/1997 $113.64 $133.17 $144.58 $126.70
FYE 12/1998 $ 76.14 $187.65 $193.32 $223.17
FYE 12/1999 $103.98 $339.01 $243.34 $490.09
</TABLE>
Industrials and a similar Industry Index for the same period.
9
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held five meetings during the fiscal year December 31,
1999. The Board has two standing committees: the Audit Committee and the
Compensation Committee, both established in June 1996. The Audit Committee
recommends engagement of the Company's independent accountants, approves the
services performed by such accountants and reviews and evaluates the Company's
accounting systems and its system of internal accounting controls. The
Compensation Committee makes recommendations to the full Board of Directors
regarding levels and types of compensation of the Company's executive officers
and administers the 1996 Incentive Stock Plan. See "Executive Compensation" and
"Description of Certain Plans". In 1999, the Audit Committee met once and the
Compensation Committee met three times in performing their responsibilities. In
1999, no director failed to attend at least 75% of the aggregate number of Board
and Committee meetings during the period of his or her service.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During 1999, the Company's Compensation Committee consisted of Messrs.
William H. Channell, Sr., an executive officer and employee of the Company,
Eugene R. Schutt, Jr. and Richard A. Cude (see "Certain Relationships and
Related Transactions"). No additional information concerning the Compensation
Committee or the Company's executive officers is required by Item 402 of
Regulation S-K.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation programs are administered by the
Compensation Committee of the Board of Directors ("Committee"). The
compensation policy of the Company is designed to motivate the overall success
of the Company by:
- Attracting, retaining and rewarding highly qualified and productive
individuals;
- Delivering a significant portion of compensation through performance-based
incentives; and
- Encouraging executive stock ownership to align the interest of management
with those of shareholders.
Base Salary and Annual Incentive Compensation
The initial base salary of the Chief Executive Officer, Mr. William H.
Channell, Sr., was established by an employment agreement entered into at the
time of the Initial Public Offering. Mr. Channell, Sr.'s base salary is subject
to cost of living increases; however, a cost of living increase was not paid in
1998 or 1999. At the present time, he does not participate in any of the other
incentive plans administered by the Committee. His 1999 salary was scheduled to
be $520,000. Because of reduced hours provided to the Company during 1999 by
Mr. Channell, Sr., we have determined and he has agreed to reduce his salary for
the year 1999 to $420,000.
The initial base salary of the President and Chief Operating Officer, Mr.
William H. Channell, Jr., was also established by an employment agreement
entered into at the time of the Initial Public Offering and was adjusted in 1997
by a 4% cost of living increase. The Committee has determined that it is in the
interest of the Company for Mr. Channell, Jr.'s annual and long-term incentive
compensation to be aligned with increases in shareholder value. This objective
is to be achieved by limiting Mr. Channell, Jr.'s base pay to its 1997 level
($520,000) and providing for incentive bonuses based on aggressive performance
factors which enhance stockholder value. Accordingly, the Committee had
approved a three-year plan for the years 1997, 1998 and 1999. The Committee is
currently studying a new three year plan for the years 2000, 2001 and 2002,
which will be finalized in the second quarter of the year 2000. In addition to
and as a part of that plan, the Committee has approved an increase in Mr.
Channell, Jr.'s base pay to $598,000 per year beginning January 1, 2000.
The annual bonus amounts that Mr. Channell, Jr. may become entitled to receive
in respect of 1999 performance total $410,000. Mr. Channell, Jr. and the
Company previously entered into an amendment to Mr. Channell, Jr.'s employment
agreement that makes the payment of annual bonus amounts for each bonus year
dependent upon the continued provision of evaluated full-time service in the
following calendar year. As a result, the $410,000 bonus amount for 1999 will
not be earned by or payable to Mr. Channell, Jr. except as follows (and provided
that on each specified date Mr. Channell, Jr. continues to provide quality full-
time service to the
10
<PAGE>
Company): March 31, 2000 - 30%; June 30, 2000 - 30%; September 30, 2000 - 20%;
and December 31, 2000 - 20%. The Committee has determined that the 1999 bonus
calculated based on 1998 performance ($150,000) was not earned in 1999 and will
not be paid.
Long-Term Incentive Plans
Executives and employees of the Company (other than Mr. Channell, Sr., who
already owns a large number of shares of the Company) are encouraged to own
shares of the Company's stock, thereby aligning the interests of management with
those of shareholders and tying a significant portion of executive compensation
to long-term market performance. The 1996 Incentive Stock Plan initially
permitted the granting to key employees, directors and service providers of
stock options to purchase up to 750,000 shares of the Company's Common Stock.
During 1999, the stockholders and the Board of Directors approved an increase in
the number of shares available for issuance under the plan to 1,500,000 (see
"Description of Certain Plans - 1996 Incentive Stock Plan"). All options issued
in 1999 had an exercise price equal to the market price of the Company's stock
at the time of grant.
During 1999, the Committee determined that due to the relationship between
the option price and the stock trading price of certain options, the options
were not providing the employee incentives they were initially intended to
provide. Accordingly, the committee recommended and the Board approved the
repricing of substantially all the stock options issued in the year 1997.
Excluded from such repricing were 1997 options held by members of the Board of
Directors. (See "Description of Certain Plans - Options/SAR Repricings").
Tax Issues
For 2000 and later years, the Committee intends to continue to seek to
structure executive compensation arrangements to preserve the deductibility of
Named Officer compensation under applicable Federal and state income tax laws,
including the Omnibus Reconciliation Act of 1993, while also taking into account
the need to provide appropriate incentives to the Company's key executives.
However, no assurance can be given that the Company will preserve the
deductibility of all executive compensation.
COMPENSATION COMMITTEE
Richard A. Cude, Chairman
William H. Channell, Sr.
Eugene R. Schutt, Jr.
March 27, 2000
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has two leases for approximately 260,000 square feet of
manufacturing, warehouse and office space in Temecula, California, with William
H. Channell, Sr., a principal stockholder and the Chairman of the Board and
Chief Executive Officer of the Company. The term of the first lease is through
December 31, 2005, with two five-year renewal options. The lease provides for
annual cost of living increases. Additionally, an adjacent 100,000 square foot
building was constructed and completed in 1996. Subsequent to December 31, 1996,
the Company guaranteed debt of Mr. Channell, Sr. of approximately $2.7 million
incurred in connection with construction of the building. This building is also
being leased from Mr. Channell, Sr. through 2005, with two five-year renewal
options. The Company believes that the terms of these leases are no less
favorable to the Company than could be obtained from an independent third party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities (collectively,
"Insiders"), to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "Commission") and the
NASDAQ Stock Market. Insiders are required by regulation of the Commission to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that all
insider filing requirements were timely filed.
11
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
The Company's Bylaws provide that the Board of Directors will be staggered
into three classes. The directors in a single class are elected at each annual
meeting of stockholders to serve for a term of three years or until their
successors have been elected and qualified. The authorized number of members of
the Board of Directors is currently seven.
The Company's nominees for election to the Board of Directors are currently
serving as Directors of the Company and have consented to being named in the
Proxy Statement and to serve if elected. Directors are elected by a favorable
vote of a plurality of the shares of voting stock present and entitled to vote,
in person or by proxy, at the Meeting. Accordingly, abstentions or broker non-
votes as to the election of directors will not affect the election of the
candidates receiving the plurality of votes. Unless instructed to the contrary,
the shares represented by proxies will be voted FOR the election of the nominees
named herein. Although it is anticipated that the nominees will be able to serve
as directors, should any nominee become unavailable to serve, the proxies will
be voted for such other person as may be designated by the Company's Board of
Directors in accordance with their judgment.
Set forth below is the name and description of the background of the nominees
for Director of the Company and their principal occupation for the past five
years. The nominees first became Directors of the Company in the year set forth
in the biographical information and have continually served as Directors of the
Company since that date.
<TABLE>
<CAPTION>
Name Age Position
--------- --- -------------------
<S> <C> <C>
William H. Channell, Jr. 42 Director, President and Chief Operating Officer
Richard A. Cude 66 Director
</TABLE>
Biographical information follows for the nominees. Age is as of December 31,
1999:
William H. Channell, Jr., has been the President and Chief Operating Officer
of the Company since the Company's Initial Public Offering. He has been a
Director of the Company since 1984. Since joining the Company in 1979, Mr.
Channell, Jr. has held the positions of Executive Vice President, Director of
Marketing and National Sales Manager. Mr. Channell, Jr. is a principal
stockholder of the Company and is the son of William H. Channell, Sr. and
Jacqueline M. Channell.
Richard A. Cude became a Director of the Company during 1996. Mr. Cude has
been the General Manager of the Los Angeles Support Center for Courtaulds PLC
London, England since 1994 and has served in various capacities with Courtaulds
since 1988. Prior to that, Mr. Cude has been with various companies involved in
the marketing of products to the communications and telecommunications industry.
Mr. Cude is currently retired.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY OTHERWISE.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Grant Thornton LLP, the Company's independent public accountants
for the fiscal year ended December 31, 1999, was selected by the Board of
Directors, upon recommendation of the Audit Committee, to act in the same
capacity for the fiscal year ending December 31, 2000, subject to ratification
by the stockholders by an affirmative vote of a majority of the outstanding
shares of the Company's Common Stock present or represented at the Meeting.
Neither the firm nor any of its members has any relationship with the Company or
any of its affiliates, except in the firm's capacity as the Company's
independent public accountants.
12
<PAGE>
A representative of Grant Thornton LLP is expected to be present at the
Meeting and will have the opportunity to make statements if they so desire and
respond to appropriate questions from the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF
GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
All proposals of stockholders intended to be presented at the Company's 2001
Annual Meeting of Stockholders must be directed to the attention of the
Secretary of the Company, at the address of the Company set forth on the first
page of this Proxy Statement, by December 25, 2000, if they are to be considered
for possible inclusion in the Proxy Statement and form of proxy used in
connection with such meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other matters which may be presented for consideration at the Annual Meeting.
However, if any other matter is presented properly for consideration and action
at the Annual Meeting, or any adjournment or postponement thereof, it is
intended that the proxies will be voted with respect thereto in accordance with
the best judgment and in the discretion of the proxy holders.
ANNUAL REPORT AND FORM 10-K
The 1999 Annual Report to Stockholders and Form 10-K, without exhibits,
containing the financial statements of the Company for the year ended December
31, 1999, accompanies this proxy statement. A list of exhibits is included in
the Form 10-K and are available from the Company upon the payment to the Company
of the costs of furnishing them.
By Order of the Board of Directors,
/s/ Jacqueline M. Channell
Jacqueline M. Channell
Secretary
Dated: April 10, 2000
13
<PAGE>
PROXY CHANNELL COMMERCIAL CORPORATION PROXY
Proxy Solicited on Behalf of the Board of Directors of the Company
for Annual Meeting, May 8, 2000
The undersigned hereby appoints William H. Channell, Sr., Jacqueline M.
Channell, Eugene R. Schutt, Jr. and Peter J. Hicks, and each of them, as
proxies, each with the power of substitution, and hereby authorizes them to vote
all shares of Common Stock which the undersigned is entitled to vote at the 2000
Annual Meeting of the Company, to be held at the Embassy Suites Hotel, 29345
Rancho California Road, Temecula, California 92592 on Monday, May 8, 2000 at
9:00 a.m., local time, and at any adjournments or postponements thereof (1) as
hereinafter specified upon the proposals listed on the reverse side and as more
particularly described in the Company's Proxy Statement and (2) in their
discretion upon such other matters as may properly come before the meeting.
The undersigned hereby acknowledge receipt of: (1) Notice of Annual Meeting of
Stockholders of the Company, (2) accompanying Proxy Statement, and (3) Annual
Report of the Company for the fiscal year ended December 31, 1999.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as your name appears hereon, date and return this Proxy
promptly in the envelope provided. Please correct your address before returning
the Proxy. Persons signing in a fiduciary capacity should indicate that fact
and give their full title. If a corporation, please sign in full corporate name
by the president or other authorized officer. If a partnership, please sign in
partnership name by an authorized person. Joint owners must each sign
personally.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
<PAGE>
<TABLE>
<CAPTION>
[x] PLEASE MARK VOTES ---
AS IN THIS EXAMPLE |
<S> <C> <C> <C> <C>
For All With- For All
- ------------------------------------ 1. Election of Directors. Nominees hold Except
CHANNELL COMMERCIAL CORPORATION [ ] [ ] [ ]
- ------------------------------------ (01) William H. Channell, Jr.
(02) Richard A. Cude
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name of the nominee. Your
shares will be voted for the remaining nominee.
RECORD DATE SHARES:
For Against Abstain
2. Selection of Grant Thornton LLP as the [ ] [ ] [ ]
Company's independent public accountants
for the year ending December 31, 2000.
Mark box at right if you plan to attend the meeting. [ ]
------
Please be sure to sign and date this Proxy. Date Mark box at right if an address change or comment has been [ ]
- ------------------------------------------------ noted on the reverse side of this card.
- ---Stockholder sign here--Co-owner sign here---
DETACH CARD DETACH CARD
</TABLE>
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at 9:00 a.m. on Monday, May 8, 2000, at the Embassy Suites Hotel located at
29345 Rancho California Road, Temecula, California. Detailed information as to
the business to be transacted at the meeting is contained in the accompanying
Notice of Annual Meeting and Proxy Statement.
Regardless of whether you plan to attend the meeting, it is important that your
shares be voted. Accordingly, we ask that you sign and return your proxy as
soon as possible in the envelope provided. If you plan to attend the meeting,
please mark the appropriate box on the proxy.
Sincerely,
Jacqueline M. Channell
Secretary
